That’s not quite true.  In fact, you may have heard about what many are calling the Next-Big-Wave in financing – securities based lending. Stock loans, which are Non-recourse loans, are currently available at up to 80% LTV, based upon the security being used as collateral.

Securities Lending is a long-established process.  Hundreds of successful stock-lending transactions have been executed involving the American Stock Exchange (AMEX), National Stock Market and Small Cap Stock Market (NASDAQ), New York Stock Exchange (NYSE), Over-the-Counter Bulletin Board (OTCBB), and certain foreign exchanges.

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Stock loans make money available for those interested in taking advantage of investing in today’s Real Estate market.  For those people with money invested in marketable securities, there is a golden opportunity to cash-in on the tremendous RE investment opportunities now available.

Today, there are multiple commercial & residential RE properties available for about 30% to 50% of what they were only two years ago and stock loans can be used to purchase RE or for any other use – securities based loans are non-purpose / non-recourse loans.

Stock loan lending programs are designed for forward-thinking investors who wants to retain the future ownership of their assets as well as leverage the present value of their securities for immediate cash needs.

Get the facts about securities lending –

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On the other hand, in determining whether or not we’re actually experiencing a world-wide credit crunch, let’s start to answer that question by offering a definition of what is a credit crunch.  Here’s one definition of a “Credit Crunch”, which claims private bankers are the real source of today’s financial problems that have evolved since the establishment of the Federal Reserve System.

“A panic-driven massive withdrawal of credit from all viable sections of society where today credit is desperately needed by the banks who have previously been engaged in the unsustainable, irresponsible and unfounded lending of fictitious money in massive amounts; largely to people who have no means of ever repaying it as agreed.”

With that said, you may say that’s quite an indictment of banks and the overall banking system, so let’s take a closer look at what triggered today’s credit crunch, which has now grown into a full-blown global recession and is clearly responsible for ruining countless peoples’ lives.

As a starting place, you must understand that “money is created by the banking system out of nothing”.

This is wrong, but unfortunately it’s the way it is.  Money is created when banks create debt instruments that are lent at interest to all sections of the community, including governments, international institutions, nationalized industries, big businesses, small and medium sized businesses, other banks  (big and small), insurance companies, hedge funds,  and, of course, private citizens.

This debt is mostly not considered non-repayable because any institution or anyone borrower who manages to repay this borrowed money, plus interest, does so at the cost of other borrowers not being able to perform.

Traditionally governments, even with their power of taxation, have not been able to repay the money they have borrowed.  The core lending is shoved into a pile and called the “national debt” or “treasury bonds”, or something like that.

Because this debt is unrepayable, the whole system is unworkable in the long run.  Sure, it can appear to be working for long periods, while lending is increasing and the amount of money in circulation is therefore keeping fairly constant in spite of large amounts being withdrawn through loan repayments.

But after a number of years the system always threatens to collapse, because there is a limit to the amount of “phony money” the banks can lend before their stockpile of real money – which was supported by gold in former times, now more likely treasury bills and other securities – threatens to dry up and destroy the solvency of the banks themselves.

Indeed, a large number of banks have collapsed in spite of calling a halt to further lending and in spite of billions having been pumped into the banking system by leading governments such as the United States and Great Britain.  Today, in spite of President Obama’s efforts with massive bail-out money being provided to American banks and recent stock market rallies, there are banks in the United States which are still folding.  Where is this heading?

The only people benefiting from all of this are the really huge banking houses such as the Rothschild dynasty and J.P. Morgan.  Today, even Goldman Sachs, who is now again profitable and still paying its fund managers unreasonable and obscene bonuses with taxpayers’ money, is in very dangerous waters.

It’s obvious from even a cursory survey of this situation that the system of having private bankers control the currency, which is an absolutely “control lever” over any economy, is sheer lunacy.  Today, private bankers use the incredible power which has been vested in them for centuries for their own enrichment and power, and the evil “hidden agenda” they pursue in their quest for global domination.

Consider this U-Tube video, which shows Alex Jones’ interview with the late Aaron Russo, producer of the movies “Trading Places” & “America: Freedom to Fascism” where Rocefeller reveals some startling details about the 911 FRAUD, the CFR, the global elite, and the New World Order to Aaron Russo and totally exposes their true agenda for world wide  domination by the global elite resulting in a New World Order.

You MUST SEE this telling video.  It will reveal some astonishing little know facts about how our lives are being manipulated and contolled by the global elite.  This video will shock & astound you.

In Great Britain private bankers have had this power unopposed since 1694, when the UK central bank, the Bank of England, was founded.  It kept its name even after the United Kingdom was formed from the union with Scotland and Ireland some years later.

In the United States there were several attempts to impose a central bank on the new republic early in the nineteenth century but each time these attempts were eventually rejected.  Ultimately they got their way.  In 1913, on Christmas Eve, while most people were going home to their families for the Christmas holiday, a small group of criminal plotters let by Nelson Aldrich, a corrupt senator whose daughter married a Rothschild, managed to get the Federal Reserve Bill passed before only a handful of senators, and economically enslave the United States.

Since then, of course, the USA has suffered the Great Depression of the 1930s, numerous financial panics (which the Federal Reserve Act of 1913 was supposed to put an end to), and an escalating level of public and private debt.  The mighty economic engine of the United States has gradually been withered away and is now in serious danger of complete collapse.

Thus is the story, or a small part of it, so far. The worst of the current recession is shortly to come.

Today, most people do not understand where inflation comes from, how our money is printed, and who is in charge of printing our money.  To make it worse the average American does not even know what the Constitution says about our government and money.

To keep it simple, the United States Constitution says in article 1, section 8. “[Congress shall have the power..] To coin Money, regulate the Value thereof, and of foreign coin, and fix the Standard of Weights and Measures”.  The Constitution does not give Congress the authority to print paper money themselves, let alone delegate control over monetary policy to a central bank.

Before the mid-twentieth century our currency was backed by an asset, more importantly it was backed by gold.  For the longest time in our country the dollar was worth 1/20 of an ounce of gold.  After the Federal Reserve was created in 1913 our government went on a mission to not only eliminate the gold standard but confiscate the gold from its citizens as well.

So you may ask why, why would the government do that?  Why would they disregard the Constitution? Well it wouldn’t be the first time and probably not the last.  The simple answer to those questions is this: When an asset such as gold backs money, government deficit spending is severely limited. With the creation of the Federal Reserve we have given the government the ability to have money printed out of thin air and allowed bankers to “create money from nothing”.

Like G. Edward Griffin said, “if you give someone the power to create money out of thin air, don’t be surprised when they create money out of thin air”.  The world we live in today goes like this – the Federal Reserve prints our money and lends it to our government at interest, then this loan is guaranteed by the taxpayers.

It is not a coincidence that the income tax was created in 1913, the same year the Federal Reserve act of 1913 was passed by congress.  The Federal Reserve is a private bank held by private stockholders.  We cannot audit the Federal Reserve.  It is not owned or run by the taxpayers or the federal government.

Although I speak from a minority position which is not well understood by most people, I say “let’s end the Federal Reserve”.  Congress does have the power to do that and we should demand that they do it.

Below is some quotes and text. There is a Federal Reserve Abolition Act that was brought to committee. It is called The Federal Reserve Board Abolition Act (H.R. 2755).  It is still sitting in committee in congress. With our congressional system, for many bills, this is the closest they will ever come to actually being debated on the floor of congress.  For this to change, we the people need to write our congressmen and demand they co-sponsor this and take it out of committee

Quotes:

G. Edward Griffin quotes:

“Inflation has now been institutionalized at a fairly constant 5% per year. This has been determined to be the optimum level for generating the most revenue without causing public alarm.  A five percent (5%) devaluation applies, not only to the money earned this year, but to all that is left over from previous years.  At the end of the first year, a dollar is worth 95 cents.  At the end of the second year, the 95 cents is reduced again by 5%, leaving its worth at 90 cents, and so on.  By the time a person has worked 20 years, the government will have confiscated 64% of every dollar he saved over those years.  By the time he has worked 45 years, the hidden tax will be 90%.  The government will take virtually everything a person saves over a lifetime”.

Rep. Ron Paul to Congress:

“Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy.  The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency.  The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank.  Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.”

“In fact, Congress’ constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender.  Therefore, abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation’s founders: one where the value of money is consistent because it is tied to a commodity such as gold.  Such a monetary system is the basis of a true free-market economy.”

This discussion begs a few serious questions, namely -

1.  What will come of the world’s financial systems?

2.  Is it true that the “global elite” actually desire to establish a “One-World Order” with complete power of every citizen’s ability to purchase goods and live a life free from financial slavery?

3.  Should the Federal Reserve System be abolished?

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Preferred shares of these GSEs (“government-sponsored enterprises”) were considered so safe that banking regulators let banks count them in the capital required as a cushion against loan losses. The shares were safe until last years, when both the common and preferred shares of the distressed duo suddenly plunged. Between May 15 and August 25, Fannie’s common shares lost 77% of their value, and its preferred shares lost 58.8% in that short time. Freddie Mac’s preferred shares plunged even more, down 65.5%.

In July 2008, the U.S. Treasury sought and was granted a rescue package involving an unlimited credit line for Fannie Mae and Freddie Mac, along with the authority to buy their stock, partially nationalizing them.

Treasury Secretary, Hank Paulson, said the package was just insurance. “If you have a bazooka in your pocket and people know it,” he said, “you probably won’t have to use it.” But bazookas can spook the very people they were supposed to reassure. After the plan was approved, foreign central banks slashed their Fannie and Freddie bond purchases by more than 25%, and shareholders rushed to dump their stock. On August 22, Moody’s downgraded Fannie and Freddie’s outstanding preferred stock by a full five notches, from A1 to Baa3 (or slightly above “junk”).

On September 7, Secretary Paulson pulled out his bazooka and fired, announcing that Fannie and Freddie would be taken under a conservatorship (similar to a bankruptcy). The Treasury would underwrite the GSEs’ debt and would re-capitalize the corporations, in return for a new issue of preferred stock.

On Monday, September 8, Fannie and Freddie share values were virtually wiped out, dropping 99% from their 52-week highs. That could be a disaster for many banks, which are loaded to the gills with these preferred shares. Banks already reeling from losses on mortgages and mortgage-backed securities are now being hit at the core, shrinking their capital base.

Loss of bank capital works as leverage in reverse: at a capital requirement of 10%, $1 lost in capital wipes out $10 in loans. Millions of ordinary investors have also been hit hard, through mutual funds, 401K plans, pension funds and annuities that have large holdings in Fannie and Freddie.

There are other aspects of Paulson’s bailout plan that could be giving policymakers Maalox moments. As noted in a July 17 Economist article:

“[N]ationalisation . . . would bring the whole of Fannie’s and Freddie’s debt onto the federal government’s balance sheet. In terms of book-keeping this would almost double the public debt, but that is rather misleading. It would hardly be like issuing $5.2 trillion of new Treasury bonds, because Fannie’s and Freddie’s debt is backed by real assets. Nevertheless, the fear [is] that the taxpayer may have to absorb the GSEs’ debt . . . . That suggests yet another irony; the debt of the GSEs has been trading as if it were guaranteed by the American government, but the debt of the government was not trading as if Uncle Sam had guaranteed that of the GSEs.

The U.S. federal debt is already up to nearly $10 trillion, putting the country’s own triple-A credit rating in jeopardy. If the government assumes the GSEs’ weighty liabilities as well, the government could lose its own triple-A rating, prompting foreign lenders to withdraw their massive infusion of funds.

But if the U.S. does not back the GSEs’ debt, the result could be the same. China’s $376 billion of long-term U.S. agency debt is mostly in Fannie and Freddie assets. Yu Yonding, a former adviser to China’s central bank, warned on August 21:

“If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic. If it is not the end of the world, it is the end of the current international financial system.

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THE ENDGAME NEARS

It could be the end of the international financial system either way, but let’s think about that. Would the end of the current financial system really be so bad? The international financial system is now controlled by a network of private central banks that print national currencies and trade them with sovereign governments for government bonds (or debt). The bonds then become the basis for creating many times their value in loans by commercial banks.

At a 10% reserve requirement, banks are allowed to fan $1 worth of reserves into $10 in loans, effectively delivering the power to create money into private hands. The price exacted by this private money-creating machine is compound interest perpetually drawn off the top, in a Ponzi scheme that has now reached its mathematical limits.

The chief role of Fannie and Freddie has been to keep the Ponzi scheme alive by adding “liquidity” to markets, something they do by buying mortgages and bundling them together as securities that are then sold to investors. Old loans are moved off the banks’ books, making room for new loans, further expanding the money supply and driving up home prices. As economist Michael Hudson noted in Counterpunch in July:

“Altruistic political talk aside, the reason why the finance, insurance and real estate (FIRE) sectors have lobbied so hard for Fannie and Freddie is that their financial function has been to make housing increasingly unaffordable. They have inflated asset prices with credit that has indebted homeowners to a degree unprecedented in history. This is why the real estate bubble has burst, after all. Yet Congress now acts as if the only way to resolve the debt problem is to create yet more debt, to inflate real estate prices all the more by arranging yet more credit to bid up the prices that homebuyers must pay.

“. . . The economy has reached its debt limit and is entering its insolvency phase. We are not in a cycle but the end of an era. The old world of debt pyramiding to a fraudulent degree cannot be restored

“. . . . The class war is back in business, with a vengeance. Instead of it being the familiar old class war between industrial employers and their work force, this one reverts to the old pre-industrial class war of creditors versus debtors. Its guiding principle is ‘Big Fish Eat Little Fish,’ mainly by the debt dynamic that crowds out the promised economy of free choice.”

“. . . No economy in history ever has been able to pay off its debts. That is the essence of the ‘magic of compound interest.’ Debts grow inexorably, making creditors rich but impoverishing the economy in the process, thereby destroying its ability to pay.”

Recognizing this financial dynamic most societies have chosen the logical response. From Sumer in the third millennium BC and Babylonia in the second millennium through Greece and Rome in the first millennium BC, and then from feudal Europe to the Inter-Ally war debts and reparations tangle that wrecked international finance after World War I, the response has been to bring debts back within the ability to pay.

“This can be done only by wiping out debts that cannot be paid. The alternative is debt peonage. Throughout most of history, countries have found again and again that bankruptcy – wiping out the debts – is the way to free economies. The idea is to free them from a situation where the economic surplus is diverted away from new tangible investment to pay bankers. The classical idea of free markets is to avoid privatizing monopolies, such as the unique privilege of commercial bankers to create bank-credit and charge interest on it.”

Under current law, if the GSEs’ capital falls too far below required levels, the Office of Federal Housing Enterprise Oversight (their regulator) is authorized to take control of the firms and impose a form of bankruptcy called a conservatorship. What happens in a conservatorship was explained by former Federal Reserve consultant Walker F. Todd in a July 23 article:

“Traditionally, conservatorship freezes existing bank accounts and then allows limited withdrawals until authorities determine how much of those frozen accounts may be distributed pro rata to the claimants. After the appointment of a conservator, new deposits and other funds received as well as new investments would be fully protected.”

Claims of creditors are not imposed on the taxpayers but are satisfied from the corporation’s existing assets. Claimants take according to seniority, with lenders being senior to shareholders, and the proceeds from any new business being kept separate. Fannie and Freddie investors would take some losses under this scenario, but the available pot for settling claims is quite large.

Most of the GSEs’ mortgages are not junk but are genuine and are being paid. Nouriel Roubini, who is Professor of Economics at New York University and has a popular website called Global EconoMonitor, estimates that the “haircut” for securities holders would be a modest 5% ($250 billion on $5 trillion). He notes that securities holders are getting a subsidy of $50 billion a year over what they would earn if they had invested in U.S. Treasuries, specifically because Fannie and Freddie carry more risk; and risk means the occasional haircut. Roubini concludes:

“It is . . . time to put a stop to the coming ‘mother of all bailouts’ starting with a firm stop to the fiscal rescue of Fannie and Freddie, institutions that have behaved for the last few years like the ‘mother of all leveraged hedge funds’ with their reckless leverage and reckless financial activities.”

“. . . [L]et’s call a spade a bloody shovel: nationalise Freddie Mac and Fannie May. They should never have been privatised in the first place. . . . Increase taxes or cut other public spending to finance the exercise. But stop pretending. Stop lying about the financial viability of institutions designed to hand out subsidies to favoured constituencies.”

NATIONALIZATION WITHOUT TAXATION:

SUCCESSFUL HISTORICAL MODELS

Roubini suggests that full nationalization of Fannie and Freddie would require an increase in taxes or cuts in other public spending, but there are other possible funding solutions, ones with quite successful historical precedents. If the multiple layers of profiteers, speculators, derivatives, commissions, bonuses, fees and general fraud were eliminated from the mix, a nationalized Fannie/Freddie could finance itself.

This was proven in the 1930s with the Home Owners’ Loan Corporation (HOLC), a government-owned agency set up to reverse a disastrous wave of home foreclosures. The HOLC was funded by the Reconstruction Finance Corporation (RFC), another wholly government-owned agency that performed the functions of a public bank. The RFC successfully funded not only the New Deal but America’s participation in World War II. In a February 2008 article in The New York Times, Alan Binder recommended a return to the HOLC model as a way out of the current mortgage crisis. He wrote:

“The HOLC was established in June 1933 to help distressed families avert foreclosures by replacing mortgages that were in or near default with new ones that homeowners could afford. It did so by buying old mortgages from banks . . . and then issuing new loans to homeowners. The HOLC financed itself by borrowing from capital markets and the Treasury.”

“The scale of the operation was impressive. Within two years, the HOLC granted over a million new mortgages. (Adjusting only for population growth, the corresponding mortgage figure today would be almost 2.5 million.) Nearly one of every five mortgages in America became owned by the HOLC. Its total lending amounted to $3.5 billion. . . .” (The corresponding figure today would be about $750 billion.)

“As a public corporation chartered for a public purpose, the HOLC was a patient and even lenient lender. . . . But times were tough in the 1930s, and nearly 20 percent of the HOLC’s borrowers defaulted anyway. So the corporation eventually acquired ownership of about 200,000 houses, nearly all of which were sold by 1944. The HOLC closed its books in 1951, or 15 years after its last 1936 mortgage was paid off, with a small profit. It was a heavy lift, but the incredible HOLC lifted it.”

“Today’s lift would be far lighter. . . . Given current low interest rates, a new HOLC could borrow cheaply and should find it easy to earn a two-percentage-point spread between borrowing and lending rates, for a gross profit of maybe $4 billion to $8 billion a year.”

The RFC initially capitalized the HOLC by buying all of its stock for $200 million. The HOLC was then authorized by statute to issue ten times that sum (or $2 billion) in tax exempt bonds. In the same way, in 1937-38 the RFC created and funded Fannie Mae as a wholly government-owned agency, for the purpose of injecting money into the banking system so that banks could increase the volume of home mortgages. The RFC and its agencies funded their operations by selling bonds at a modest interest to the Treasury and the public, then relending the acquired funds at a slightly higher interest. The “spread” was sufficient to cover operating costs and losses from default and still turn a modest profit.

How did the HOLC manage to reverse a far worse foreclosure crisis than we have today and still turn a profit, when Fannie and Freddie – which also raise their loan money by selling securities to investors – have become hopelessly bankrupt in that pursuit? The difference seems to be that the HOLC was a public institution operated as a public service.

Fannie and Freddie are private, profit-making ventures designed to make money for their investors and political exploiters. As Professor Roubini observes, “These GSEs were designed to make losses. They are expected to make losses. If they don’t make losses they are not serving their political purpose.” When the profiteering is taken out and the business is run as a public service, the math works.

There is another American model that is even older than the HOLC, which presents even more exciting possibilities. In the first half of the 18th century, the province of Pennsylvania completely funded its government without taxes or debt, through a publicly-owned bank that issued paper currency and lent it to farmers. The bank did not have to borrow capital before it made loans; it just created the currency on a printing press. The money was lent rather than spent into the economy, so it came back to the government in a circular flow, avoiding inflation; and interest on the loans was sufficient to fund the government’s operations without taxation.

Such a public bank today could solve not only the housing crisis but a number of other pressing problems, including the infrastructure crisis and the energy crisis. (See E. Brown, “Sustainable Energy Development: How Costs Can Be Cut in Half,” webofdebt.com/articles, November 5, 2007).

Once bankrupt businesses have been restored to solvency, the usual practice is to return them to private hands; but a better plan for Fannie and Freddie might be to simply keep them as public institutions. In the August 8 London Tribune, British MP Michael Meacher proposed this alternative for Northern Rock, a major British bank that was recently nationalized after becoming insolvent. He wrote:

“[W]hen the banks have failed the public interest so badly and still even now continue to pursue so single-mindedly their commitment to privatize their gains whilst socializing their losses, would not a publicly owned bank be the most effective way of changing the current corrosive financial culture of short-termism, lower investment, house price inflation, and insider enrichment at the expense of systemic fragility for everyone else? Perhaps we should not return Northern Rock to the private sector after all.”

Perhaps we should not return Fannie and Freddie either.

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